Episode 068 - Why I’m bullish about (and love) Mexico

The first time I ever went to Mexico was in 2007. A friend of mine from India suggested it. It was probably some of the best advice I ever received. Since then I have spent a considerable amount of my time in Mexico, and have seen it evolve over that almost 14 year period. But today geopolitics and world affairs now has it poised for exponential growth, and in this episode I will explain how you can take part in it, if you choose to.

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Show Notes

First, let’s make some definitions about what is a huge and diverse country. For those not having had the opportunity to set foot in Mexico, it is clearly never portrayed well in western media. Most people see shock & awe news stories that send a clear message to never go there - “Over the hill, there be dragons”. That was my experience prior to my first foray into our neighbor to the south. Living in Arizona, it is no more than a 2 hour drive from where I live, so it was always intriguing.


The population of Phoenix (as was the case when I lived in Los Angeles) was predominantly of Hispanic origin. The Latin accents are everywhere. The number of Mexican restaurants were on every corner, and even parts of Phoenix are “Little Mexico” where street markets abound. With that comes the poverty that has also been exported - those living in the shadows who risked their lives to cross the seering desert in search of a better life, often never found it. But I see them lined up at the local money exchange, dutifully sending money back to their families abroad.


When you develop real estate for rent in Phoenix, you find them as your construction crew. Most of the time, you don’t get a choice - you hire a firm, and they have hired them. You get to know them working alongside. They become your friends, your team and in some cases, your tenants. I was speaking at length with one of them just a few weeks ago, and the subject of sending money home to their family is common place. He told me about his brother who lives in Leon, in Guanauato State, a town I have been through before - known for its highest quality leathergoods, and how his brother has been accepted into University in Guadalajara, a university that I know well as it was the brain trust that educated the surgeons and nursing staff that worked on my own surgery case in 2019. Everything started to seem close by - the pure definition of a “small world”.


Yes, Mexico is here in our neighborhood. And it is our neighbors - more than just the geographical location.


So when my Indian friend told me about how he took his family to this beautiful seaside town called San Carlos, in Sonora state, Mexico, I was intrigued. “Isn’t their danger there?”, I would ask? “No, not like the BS on the news”, he said. I remember that this was at the time of the 2007/2008 GFC, and money was tight. Still I wanted my family to have a vacation, so I discussed trying this out. My wife is game for most worldwide adventures, so we made sure all the passports were up to date (prior to then, you could go into the “travel zones” in Mexico on a US drivers license, but they changed that rule - only for the right reasons). But you needed special car insurance, and if you had a car that was financed, you needed to get permission from your finance company to take it into Mexico. We crossed all the I’s and dotted all the T’s and decided to brave it.


I remember the first trip - we drove into the town of Nogales. First big mistake. We left abundance in Arizona into stark poverty in Nogales. The shock of how people lived, felt like a 3rd world country. The border regions do appear that way, anywhere along the periphery of Mexico and the USA. It is understandable when you see how those with nothing quest forward to a place with opportunity. Being an immigrant myself, I understood this. They didn’t have the wear-withal to pay lawyers, etc. like I had to in the 1990s, but they instead paid coyotes, or guides, to help them cross. Normally this was doing a deal with the drug cartels that operated more like the Mafia in Mexico. More on that later.


After driving through the crazy Latin traffic of Nogales, we emerged on the other side. Only later did I realize there is a “Business Route” that bypasses all of that, which is how I do it all now. But sometimes you have to learn the hard way. 21 kilometers later (yes, we are now in the land of metric for those in the USA), there is a border stop. It is hard to see, somewhat hidden just before an Oxo (like a 7/11) there. You stop, show your passport, car insurance, exchange your $USD for Pesos and they send you on your way. They charge a $20 fee for a 6 month - yes, 6 month - travel VISA. Although they don’t speak much English, it gives you the chance to try out your Spanish and make a total fool of yourself. But they are used to that. It seems that the government doesn’t really care much about anything, and you will find that is a running theme.


Then you get your permission, so further south you drive. That’s when you see it. The same state, the same land (beautiful), the same hills, the same deserts, etc. as Arizona. It was Arizona. You understand that the birds that fly over the border everyday don’t see a border. Borders are what we conjure up to make us feel better, but nature doesn’t see them. You keep driving. And driving. about another 3 hours of driving you hit the first larger city - Hermosillo. You come face to face with insane drivers, and you understand that it isn’t the drug cartels you should be scared of - it is you adjusting to the way they drive and do things. And that’s fine - you will adjust. Just be careful that you can get through the next round-about or intersection, because you better be prepared to go with the flow. I’ve driven in Italy before, so this wasn’t that shocking, but it takes some courage to adjust to it. Eventually you get through it and head further south. Eventually you reach your destination, and after you turn off the main freeway (a freeway that is as good as the US 10 freeway in terms of quality of driving, etc.) you see it.


The sea of Cortez. The protected waterway that is fed from the Pacific Ocean that comes up between Baja and Sonora and presents you with beaches the likes of which I have never seen. I grew up in Australia with some of the best beaches in the world, but these usurped even that. These were idylic. Postcard like. And what was shocking - no one was on them. Later as we got to know the the place, I took a photo of my 9 yr old daughter playing on the beach there, with literally miles of beaches in the background and not a soul on it. Compare that to California beaches.


Why did no one come here? Why did no one know anything about this place? It became a running theme for me, and the reason for me recording this podcast. Mexico is the unknown jewel to most of the world. Because all the media wants to do is make money selling commercials between the shock & awe stories of “Over the hill there be dragons”.


After you spend time there, and get through the normal “Mexi-Belly” experience, and realize you don’t drink the water unless it is bottled, you start to appreciate this beauty. But as time moves on, it isn’t the obvious natural beauty. It is far more than that.


It is the people, the family, the welcoming that they give you for going there, the willingness they have to help you, the understanding they have despite all the abusive rhetoric that is thrown at them from their neighbor to the north. Because you made the effort. You demonstrated your willingness to go there and embrace it, and they embrace you back. This is the common theme you get when talking to the expats that live there. They stay because they are wanted there. Not because they got pushed out of the USA. They stay because Mexico pulled them there.


That is what really fueled my continuous journeys back there and why I’m not stopping that anytime soon. You see, so far all I’ve told you is what a tourist sees in Mexico. That alone is more than enough reason to go. But I’m not a tourist - I’m a traveller. I go to places to see how it really is - not how the Marriott or the Westin want me to see it. And that’s when it goes from wonderful to spectacular and really is the core reason I’m recording this episode.


Years later, I got over all the fears. I started to laugh at those in the USA that had opinions of things they had never experienced. They would be so scared to go there, but they had never gone there. Those with no knowledge should never tell you of things they know nothing about. But this is the way the herd work. They follow some shiny object with no idea why because everyone else is doing that.


My experience with Mexico turned to going to Sonora to shop. I found that things in the USA were 50% of the price in Mexico. Case in point - I had to buy a mini-split airconditioner for my office. These are normal A/C units all over the world. In Australia, Europe and Mexico. Yet they are rare in the USA. I just needed a small unit to keep one room specifically cool, and it was going to be a $3,000 expense. A 2 hour car trip south, cross the border and go into the very same Home Depot in Nogales to buy from a wide range of these units, and you spend $500 for a $1500 base unit there. Drive it back, declare it to customs (they don’t care and don’t charge - at least they didn’t for me), and drive it home. Have some great Tacos down there and you’ve saved $1,000 for a nice day trip.


Same is true of medical. I’ve done many a podcast on Dental in Los Algodones, Mexico costing me 25% of the USA price, and saving my family about $25,000 for major dental procedures. I’ve done many a podcast on my surgery in Guadalajara, costing me $9K for a $125K surgery experience. But once you realize that over the hill there are NO dragons, then the world is your oyster. And you emrace the 20:1 ratio of the Peso to the $USD. You just have to pass through the gate to get the reward on the other side.


What really changed for us was when we realized just how big Mexico was, and that came from flying into Mexico City and starting to explore the hub of this vast country. There are no expats around to help you down there - you go into a major mega-city with 20+ million people in it, and you started to see how real life is. And that’s when you get it. That’s when you start to understand just what treasure lies to our south.


I’m not going to try and give a history lesson on Mexico, because I’m no expert. But when you realize that every city has a Beverly Hills neighborhood that you can afford to stay in, as it has bad areas you want to avoid. And when the 20:1 Peso to $USD allows you to live like the lifestyles of the Rich & Famous on a beer budget, you want to do that. And that’s how we have done this for over 10 years now. We stay 5 star, we eat at the best restaurants, we have the best experiences. I’ve climbed the 2nd largest pyramid in the world there, I’ve seen the beauty of the landscape, I’ve been smothered by a history far older than the USA and seen that Mexico City is more like Madrid, Spain than most other cities. More museums and art galleries than any other city in the world. More culture than I could ever imagine, and be-friending a professor of the University of Mexico didn’t hurt in learning about the vast history. It provides context of the Mayan, the Aztec, the Spanish conquest, and then the various other conquests that had occured, and the brutal 1920s revolution in which over 1 million people lost their lives. Yes, only 100 years ago when we all hear about WW1, our neighbor to the south lost 1 million people to their revolution. We don’t get taught that, and that’s wrong.


This vast history has shaped their culture and their way of thinking. The gratitude for having gone through this history shows in the nature of “La Familia” - the family. You are welcomed to their family even as a tourist and more so as a traveler.


But it gets way better. When I started to see this for what it was, I wanted to find other expats who had been living there for decades. They could really tell you why they are still there. And I did. I visited many expat enclaves, but the most prolific were the towns of Ajijic and San Miguel de Allende. Ajijic was a retirement community with over 10,000 US and Canadian expats living there. The average age was about 65 yrs old, so this is truly senior living. But they were there because they wanted to be. The costs were obviously far less than in the USA, so for anyone that got swindled with the promise of working hard for all your lives and the US government will reward you with social security & Medicare, only to find that the SS payment won’t really cover your rent in a low economic zone, and Medicare will keep you alive but barely, then it is too late for most. So they found a solution - Ajijic, and I’ve studied it both from on the ground and afar as to whether this might work for us. But we are 20 years too early, so I’ll take what I’ve learned and monitor it as the years progress. I will say that if I have to be moved into some assisted living facility at some point in my future, I would feel far safer and better cared for in Ajijiic than in Scottsdale. But that’s me - your mileage may vary. I only say before you make a decision for your life, at least do the on the ground research and don’t assume your research is some shock & awe news story on the CBS Nightly News.


However that led me to going to San Miguel de Allende - another well know home of tens of thousands of expats and that’s where I found nirvana. The most beautiful Spanish colonial town I’ve ever seen. It is no wonder than Conde Nast consistently ranks it one of the most beautiful towns in the world. It is a UNESCO World Heritage site, and I understand why. To those in Latin America, it is well known as where the “Rich & Famous” play. The most oppulent hotels, restaurants, arts district. Think of San Francisco, but without the population. Think of the best of New York City, without the attitude. But small - and yet feels huge.


I reached out to people I had encountered on podcasts, etc. and hooked up with James Guzman, the host of the Borderless Podcast. Although I’m sure the expat community are suspicious of anyone that floats through like I did, James was kind enough to accept my invitation for dinner and tell me about the real San Miguel. And that was what I needed to hear. It led to meeting more and more expats there, and that just further underscored that I was not alone in understanding the “why” when people move there. They had it all - cheap cost of living, oppulence of great real estate, restaurants, music, nightlife, and anyone with an inclination towards arts were greeted with an arts district that would rival many in Europe. The integration of expats with the local community was formed through the 150 NGOs that are there, and the long history since WW2 of US and Canadian expats moving there to give service to the local Mexican community. The fusion works and it is rare to find this.


With its close proximity to QRO and CDMX, it has cities with Costcos, Home Depots, Walmarts, etc. within 45 minute drive, and yet you would rarely need to go there. But if you are like me and need the odd computer part, etc. there are markets in QRO that have it all - like going back to the old Computer Fests of the 1990s in SoCal that I used to love.


The thing is that when you speak to the expats there, there is a sense of peace. Things slow down, and people get real about life. Life isn’t some partisan speculatory event. It is real - it is lived and it is savored. You drink in the culture and life and you embrace it. This is a world for participating in - but you see the rest of the world from a 1,000 foot perspective, and with that comes wisdom.

So that pretty much gives you a sense about why I LOVE Mexico. Everytime I land in CDMX or GDL, I smile comes across my face. I can’t control it - it just happens. It is a sense of wonder and a sense of being welcomed. I don’t even get that in my home of Scottsdale. I’m not saying that you have to be negative to the USA to be positive about another country. That’s naive. You don’t. Most expats living in Mexico have positive and happy memories of their time in the USA. They don’t speak ill of their homeland. But if you ask them when was the last time they went to the USA, you’d be surprised that most haven’t been there in years. Yet it is so close for them.


Let’s start to look at Mexico economically though, because I’m sure most of you are still following me because you want to know about how money can be made by the rise of this sleeping giant.


Ever since the NAFTA agreement was inked in the 1990s, Mexico was an active participant in trade with the USA. And they took back the wealth there and re-invested it in their country. The infrastructure is pretty amazing. Freeways rival the major freeways in the USA for vehicle travel. To see the number of semi-trailers waiting for inspection on the I-15 is jaw dropping. The amount of trade that goes to the USA is spectacular.


But this is just scraping the surface. The fact is that over the past 20 years, most major corporations have invested billions into Mexico. Cities like Monterey, Guadalajara, QRO, Puebla, and CDMX have growing faster than most I’ve seen in my travels around the world. Daimler (Mercedes) invested $2 Billion in GDL to manufacture all of their commercial and semi-commercial vehicles there. When you see an Amazon van turn up to your home with a delivery, the very truck they are driving was likely built in GDL.


If you have or see Volkswagen cars in the USA, most likely they were built in Puebla. $4 billion invested there and employing tens of thousands in the region. 85% of the output from the VW factory there services the North American market. When you see all the industrial parks, warehouses and factories in GDL or QRO, you get it. Everyone who is anyone is there. From Bosch to Ford to Samsung. They all have a heavy and growing footprint in Mexico. And with a government that has built infrastructure by rail, road & air, it is understandable that with the re-inking of NAFTA v2 (the USMCA), this is a confirmation of a long term trade deal that brings wealth to Mexico.


However imagine if there was a trade disruption between the USA and China. Imagine if Walmart were told they could no longer sell Chinese made products and had to source them from somewhere else. Where do you think they would look, to a trading partner that already had a trading agreement in place, was not an adversary and had a long history of dealing with the USA. Would it not be natural that you would favor the trading partner closest to you? Transport costs and “greenhouse gas emissions” aside, it makes perfect sense that Mexico binds with the USA to provide work to the 110+ million people there. It is not only strategic for the USA, but Mexico has a relatively stable governence as well. And let’s face it - they are not communists.


Additionally due to the work of one of the world’s richest men, Carlos Slim, Mexico is wired with fiber optic cable throughout and has some of the best Internet available. This means anyone who is a remote worker and relies on the Internet to work, could do so as easily in Mexico as in Toledo. And probably with faster ISP bandwidth speed. Your situation may vary, so check into this in your region because there is no “one size fits all” here, but in general my experience in Mexico with Internet has been excellent.


Even so, as of 2019, Mexico had a trade deficit of 600 Billion $USD. They are ready to turn that to a surplus however, and even with the 2020 pandemic, the amount of change in GDP for Mexico is so astounding that after we all get through the aftermath of a pandemic year, they are best suited for a rise in trade.


Look, the Peso won’t always be 20:1 against the $USD. It wasn’t that long ago that it was 7:1. But this is assuming that the $USD is not weakened on the world market for the benefit of its local exporters. It is hard to predict currency fluctuations, but this brings me to the #1 reason I’m bullish on Mexico. And it may surprise you.


Mexico has little debt. Debt is culturally against Mexico. They have seen their neighbors to the south fall prey to what John Perkin’s describes as “The Economic Hitman” that has overthrown so-called Banana Republics in Central America with the promise of political graft and debt but at a cost of giving up their sovereignty. Mexico has a long history of conquest and it has learned its lesson. They don’t fall to anyone. Period.


Consequently they have done what few countries have done with the IMF and World Bank. They have refused capital. They don’t need it. Yes, the people may be starving but is it not better to be rich in your freedom? There are extremes in life everywhere. As I’ve said all through my life and through the podcasts, not every child can win a prize. The laws of the jungle are real today as they have been 10,000 years ago. There are winners & losers - there are fat bellies and prey. To deny this is naive at best. Yet we want to round off all the rough edges of the world to pretend to ourselves that we can live longer, have more peace, and it all comes down to money.


If you have capital you can buy a home. Yet in Mexico, mortgages are uncommon. 99% buy their homes with cash. It is the biggest purchase they will ever make and most will pass it down the line to their heirs. Why? Because 100 years ago, 1 million people gave their lives for independence and the rewards for this was that the Mexico people were gifted land to farm and become self-sufficient on. You don’t give that away without accepting the burden that comes with it. Those that lost their lives to give you your sustainable independence. You hold it dearly.


That’s why there are strict rules as to how foreigners can buy property or hold land. You can’t own land 15 kms from a coastline. It must be held by a Mexican national, but you can participate in a 99 year trust that can be passed down to your heirs in your demise. There are parts of the country that do allow ownership in “fee simple” titles - SMA is one such place. And few know that a $250K purchase of property in Mexico entitles you to a Temp Resident VISA to live there. The term “temporary” is not literal. After 4 years on that VISA, you can convert it to permanent and then to a passport if you are so inclined. In fact this is available to any US Citizen (and most other countries) for just asking for it, filling out the paperwork, showing proof of assets or income so you won’t be a burden to Mexico, and you get it. The 6 months of tourist VISA turns into 4 years of Temp Resident VISA, and that then turns into Permanent residency and a pathway to citizenship later if you wish.


But let’s get back to why no debt is good. First, if you don’t have the stress of servicing a mortgage for a property, you don’t have to work hard all day. Sure, you have to eat, but the cost of living in Mexico is so low, that this is low hanging fruit for most.


I did a comparative study of burn-rate in the USA vs. Mexico. And this doesn’t take into consideration the Chapwood Index of rising costs of living at about 8-10% per annum in the USA. For a family of 3 in Arizona, it is likely to cost between $5-7K per month to survive taking into account a middle class lifestyle, mortgage, health insurance, food, utilities, taxes, cars, etc. I did a comparison to the same costs in Mexico which come out less than $2K per month. Considering that social security or some basic return from IRA or 401K investments would easily provide for this, and that you would be less subjected to inflation (although no guarantee of that, particularly with a country that could leap towards everyone becoming a middle class citizen), still this is about 35-40% of the USA cost of living.


But let’s get back to the subject of debt. Recently a friend of mine was talking with me about how the USA has been going through these extremes of “ups & downs” in life - bubbles then pops, etc. And why was this happening every 10 or so years? The answer is pretty simple. We live entirely on debt and are exposed to the whims of those with the capital. Banks and the Federal Reserve pick winners & losers and typically it isn’t those on “Main Street”. That’s why the 2010 Occupy Wall Street movement happened. It is why they control the oligarchs that are tied between the bankers and the politicians. They own the major technocrat organizations - the FANNG stocks. They get rich while you and I struggle. We might be given a taste of their wealth by way of the stock market from time to time, but few of us have actual wealth. Wealth that has REAL assets behind it - property, precious metals, etc. It is all paper wealth, and that can go up in smoke in an instant.


For that reason, we are exposed to the ebbs and flows of market dynamics, and that wealth gap determines wars, terrorists, and even the threat of civil war as opportunities are never given out uniformly and evenly. So yes, living in the world of no real assets and all debt will expose you to the tidal waves that rise & fall in life.


Mexico doesn’t have that debt. It doesn’t have the extremes. But with that comes the personal responsibility that many have forgotten. And this is where you start to understand the danger of Mexico.


You see, Mexico has a corrupt government which is basically dysfunctional. That said, most governments (even the USA) is basically dysfunctional. You see that all the time - they can’t pass meaningful reform for one reason or another, yet we reward them with being extorted by taxes all the time. The thing is that in the USA, corruption is done by way of lobbyists and oligarchs. Mostly in plain sight. Presidents and senators make millions and millions giving speeches to bankers who don’t go there to hear them wax philosophically, but to try and associate themselves with power and get some political benefit from it. That’s corruption and yet it isn’t illegal.


Mexico’s government doesn’t really serve the people that well. It does help to enact laws that protect its sovereignty, but it doesn’t provide a lifeline out of poverty for the millions living in the barios and the sub-standard squalor. They use the cartels as a bridge between government and survival, and the cartels want to be paid. They trade in the world of illegal drugs, contraband, kidnappings, murder for hire, coyotes, etc. and this is what gets on the nightly news. Yet the very same “Mafia” like organizations prospered in New York and New Jersey in the USA only 40 or so years ago. Those that were once the litigators that brought down the crime family of X, are now laughed at while they fall prey to a prank on the latest Borat movie or show off their stupidity trying to derail elections. Dysfunction works its way into society in so many ways.


When you are living with cartels, in whatever form, you learn the rules. You keep your distance, you don’t go into their world at night, etc. You expect to see them from time to time, but normally you don’t. They don’t want you to. They don’t want their business models interrupted, so you keep your distance. In the same way you would keep your distance from the Crypts or the Blood gangs of LA in the 1990s. We are often quick to judge other countries and yet forget our very own history with this. Cartels are not uniquely a Mexican thing. Just as you are careful about your belongings when you travel in Italy on a train, you should be also careful in any part of Latin America as well.


So yes, there are dangers. But from my own experience in over 10 years of travel to various parts of Mexico, those dangers feel less than the dangers back in the USA. And that’s a strange thing to hear me say, but I think if you speak with anyone who is an expat in Mexico you might get a similar response. Why is it that most have lived down there for decades and don’t wish to leave or return to the USA?


For all of these reasons, I’m bullish on Mexico.


I see trade and life improvements going up. I see hope for those that can’t afford to live in their home countries anymore. I see embracement and welcoming from a country that has every right to despise the rhetoric that has come from their northern neighbor. All they want is some respect, and if you are gracious, respectful and you have the habit of saying “Por favor” and “Gracias” you might just find they love you.


But there is one last thing I believe you need to understand. And it is the Parable of the Mexican Fisherman. It goes like this:


An American investment banker was taking a much-needed vacation in a small coastal Mexican village when a small boat with just one fisherman docked. The boat had several large, fresh fish in it.

The investment banker was impressed by the quality of the fish and asked the Mexican how long it took to catch them.


The Mexican replied, “Only a little while.”

The banker then asked why he didn't stay out longer and catch more fish?

The Mexican fisherman replied he had enough to support his family's immediate needs.

The American then asked “But what do you do with the rest of your time?”

The Mexican fisherman replied, “I sleep late, fish a little, play with my children, take siesta with my wife, stroll into the village each evening where I sip wine and play guitar with my amigos: I have a full and busy life, señor.”

The investment banker scoffed, “I am an Ivy League MBA, and I could help you. You could spend more time fishing and with the proceeds buy a bigger boat, and with the proceeds from the bigger boat you could buy several boats until eventually you would have a whole fleet of fishing boats. Instead of selling your catch to the middleman you could sell directly to the processor, eventually opening your own cannery. You could control the product, processing and distribution.”

Then he added, “Of course, you would need to leave this small coastal fishing village and move to Mexico City where you would run your growing enterprise.”

The Mexican fisherman asked, “But señor, how long will this all take?”

To which the American replied, “15-20 years.”

“But what then?” asked the Mexican.

The American laughed and said, “That's the best part. When the time is right you would announce an IPO and sell your company stock to the public and become very rich. You could make millions.”

“Millions, señor? Then what?”

To which the investment banker replied, “Then you would retire. You could move to a small coastal fishing village where you would sleep late, fish a little, play with your kids, take siesta with your wife, stroll to the village in the evenings where you could sip wine and play your guitar with your amigos.”

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